Legal Updates ( March 30 – April 04, 2026 )
CASE UPDATES
A shareholder or director of a company does not possess ownership over the entirety of the company’s data or assets, as a company incorporated under the Companies Act acquires a distinct juristic personality, and its property, including digital assets such as data, code, and intellectual property, vests exclusively in the company alone
The Karnataka High Court (Bengaluru Bench) in the case of Aashay Harlalka vs State of Karnataka [Criminal Petition No.12927 of 2025] dated March 25, 2026, has ruled that a shareholder or director of a company does not possess ownership over the entirety of the company’s data or assets, as a company incorporated under the Companies Act acquires a distinct juristic personality, and its property, including digital assets such as data, code, and intellectual property, vests exclusively in the company alone.
The High Court observed that the principal defence advanced on behalf of the petitioner does not withstand legal scrutiny and is liable to be rejected at the threshold. Once a Company is incorporated under the Companies Act, it acquires a distinct juristic personality, separate and independent of its shareholders and directors. The property of the Company, whether tangible or intangible, vests in the Company alone, and the parity in shareholding does not translate into proprietary entitlement over the company’s assets.
The court noted that a shareholder acquires merely a right to participate in the profits of the Company and does not, by any shareholding, obtain proprietary interests in the assets of the Company. In the contemporary digital age, the assets of a Company are not confined to physical or movable property but extend, in significant measure, to data, code, and intellectual property, which are owned exclusively by the Company.
The Court further observed that the issue is not purely civil in nature; it has all the hues and forms of cyber-crime, involving allegations of downloading, copying, deletion of source code, proprietary data, and confidential digital assets, which require highly technical and complex investigations involving forensic reconstitution of data.
Properties which have no nexus to a criminal activity relating to a scheduled offence cannot be regarded as proceeds of crime, and attachment of property acquired prior to the commission of the crime would not fall within the definition of the proceeds of crime
The Gauhati High Court in the case of Kumar Sanjit Krishna vs Directorate of Enforcement [Criminal Appeal (PMLA)/1/2025] dated March 27, 2026, has held that properties which have no nexus to a criminal activity relating to a scheduled offence cannot be regarded as proceeds of crime, and attachment of property acquired prior to the commission of the crime would not fall within the definition of the proceeds of crime.
If there is a disputed question of fact with regard to when the property had been purchased and keeping in mind the fact that the property had allegedly being registered in the name of the appellant only during the period of commission of the crime, the said disputed question of fact would have to be proved by way of evidence.
The High Court observed that the attached property is required to have a connection with the crime in question. The enforcement authority has to be able to trace the attached property to the criminal act relating to the scheduled offense, in terms of Section 2(1)(u) of the Prevention of Money Laundering Act, 2002 (PMLA). Only a property which is connected with the proceeds of the crime can be attached and the only exception to the above, is when the property derived out of criminal activity is taken out of India and held outside India.
The Court noted that the Appellate Tribunal (SAFEMA) had erroneously held that Section 2(1)(u) of the Act would include within its ambit the property of the appellant, even if it did not have any connection with the crime in question, and that even if the property was acquired prior to the crime, it was liable to be attached if the proceeds of crime had vanished and could not be traced.
The Court observed that the pre-condition for being proceeds of crime is that the property has been derived or obtained directly or indirectly, by any person, as a result of criminal activity relating to a scheduled offence. The attachment must be only in respect of property which appears to be proceeds of crime and not all the property belonging to the person concerned.
Hence, the Court concluded that only property which has been derived or obtained, directly or indirectly, as a result of criminal activity relating to a scheduled offence can be attached.
Acquiescence is a complete defence to an infringement action which contemplates the existence of two elements viz. honesty in the defendant’s adoption and use, and lack of some positive act on the part of the plaintiff
The Bombay High Court in the case of Minco India vs Minco India Flow Elements [Commercial Appeal (L) No. 1600 of 2006] dated March 18, 2026, has asserted that a person who does not come to the Court with clean hands is not entitled to be heard on the merits of his grievance, as every Court is not only entitled, but is duty bound to protect itself from unscrupulous litigants who try to pollute the stream of justice by resorting to falsehood or suppressed facts which have a bearing on the adjudication of the issues. The suppression of material facts disentitles a party to the discretionary relief of an interim injunction.
The Court held that acquiescence is a complete defence to an infringement action which contemplates the existence of two elements viz. honesty in the defendant’s adoption and use, and lack of some positive act on the part of the plaintiff. While a plaintiff’s trademark registration makes it entitled to exclusivity, it does not extend to the defendant company in peculiar circumstances where the business of both entities was intertwined flowing from the same origin, and where the plaintiff had expressly granted a no objection to the defendant’s adoption of the corporate name.
The High Court observed that the Appellate Court shall not interfere with the exercise of discretion of the Court of first instance, and substitute its own discretion, except where the same has been shown to be exercised arbitrarily or capriciously or perversely or where the Court had ignored the settled principles of law regulating grant or refusal of interlocutory injunctions.
The Court noted that the Plaintiff suppressed the material fact about their companies being promoted by the same family patriarch and about the inter se relationship between Amarendra and Raghavendra in the management of the Plaintiff and the Defendant company. The plaint completely lacked particulars about the relationship between the Plaintiff and the Defendant, or that Amarendra was a Director in the Defendant company till 2015, conveying a misleading impression that the Defendant is an un-associated third party.
The Court observed that the Plaintiff’s reliance on its registration for the mark ‘MINCO INDIA’ granted on 29/01/2024 does not entitle the Plaintiff to an injunction as a matter of course, as the Plaintiff contrived its alleged cause of action immediately after its registration. The Bench also found the Plaintiff’s inaction for over 13 years, while the Defendant continued its business under the trading name ‘MINCO’ building a formidable business with cumulative sales turnover, amounts to clear acquiescence on the part of the Plaintiff. The Court noted that the Plaintiff in fact approved the change of name of the Defendant company in the year 2012 itself, as both companies formed part of the family-promoted consortium known as ‘GICON’.
Further, the Court observed that the products do not have any mark per se, as the Plaintiff and Defendant are manufacturers of specialized industrial equipment supplied as per the specification of the client, and are not products casually available for sale in the market. Consequently, the likelihood of confusion is minimal, and the reliance by the Plaintiff on a solitary email of February 2024 is not sufficient to establish confusion or the likelihood of confusion. Thus, the court concluded that the balance of convenience is in favour of the Defendant, who has been openly and continuously using ‘MINCO’ as a part of its trade name since September 2012 and has earned reputation and goodwill.
When the landowner had divested its role in the project by vesting development and sale rights in the developer through a power of attorney, then in the absence of any contractual nexus with the homebuyer, no liability could be fastened upon it
The Tamil Nadu Real Estate Regulatory Authority in the case of Mugundhine v. Cybercity Mangadu Project Pvt Ltd. [CCP No. 62 of 2024] dated February 10, 2026, in a delayed possession dispute involving a housing project in Chennai, has held that the marketing entity is not a “promoter” and cannot be held liable, while also declining to fasten liability on the landowner and directing the developer to pay compensation. Dismissing the complaint against Anugraha Real Value Services (Chennai) Pvt Ltd. and Shriram Properties Ltd., the RERA held that neither entity had any privity of contract with the complainant.
The RERA held that the landowner had divested its role in the project by vesting development and sale rights in the developer through a power of attorney, and in the absence of any contractual nexus with the homebuyer, no liability could be fastened upon it. Adjudicating Officer however, held Cybercity Mangadu Project Pvt Ltd., the developer, liable for the delay and directed it to pay Rs 3,00,000 as compensation along with Rs 50,000 towards litigation costs.
Clarifying the scope of liability, the authority observed, “it does not come under the definition of promoter as per Section 2(zk). It did not construct or convert or sell any of the building or apartments. Similarly, it did not develop any land into a project for the purpose of selling to other persons. It had acted as a Marketing Person for the project of the 1st Respondent. Exhibits A1 & A2 do not expose this 3rd Respondent as a party to the agreements. There is no other privity of contract in between the complainant and the 3rd Respondent and so it is not liable to pay for any reliefs to the complainant.”
On the role of the landowner, the authority held that there is no other privity of contract in between this complainant and the 2nd Respondent. As it has relinquished its dealings with the 1st Respondent and as such no amount was deposited in the escrow account, the 2nd Respondent is not liable to pay any compensation or costs to the complainant.
Mere existence of unutilised or unregistered FAR in a real estate project does not, by itself, constitute a violation of Section 3 of the Real Estate (Regulation and Development) Act, 2016, in the absence of any evidence of actual marketing, sale, or booking
The Haryana Real Estate Appellate Tribunal (HREAT) in the case of Tulip Infratech Private Limited v. Haryana Real Estate Regulatory Authority, Gurugram [Appeal No. 124 of 2024] dated March 27, 2026, has held that the mere existence of unutilised or unregistered FAR in a real estate project does not, by itself, constitute a violation of Section 3 of the Real Estate (Regulation and Development) Act, 2016, in the absence of any evidence of actual marketing, sale, or booking. It further held that Clause 1(iv) of the Registration Certificate, which provided for levy of late fee in case of default, cannot override the statutory requirement of establishing an actual violation under Section 3 of the Act.
The Tribunal held that while the appellant could not be completely absolved of regulatory consequences, the law targets unregistered sale or marketing, and not mere existence of unregistered FAR. It further held that fastening full retrospective liability on the incoming promoter would be inequitable where the alleged breach itself has not been conclusively established.
The Tribunal observed that while the project reflected some regulatory non-compliance due to incomplete registration of the entire licensed area, the absence of any unlawful sale or marketing activity, coupled with overlapping registration fees already paid for certain phases, rendered the late fee imposed excessive and disproportionate, warranting only a limited and moderated liability.
Considering that there existed an element of delayed comprehensive registration of the project as a whole, and some regulatory levy is justified to uphold statutory discipline, the Tribunal stated that the circumstances warranted moderate penalty in view of the fact that the appellant voluntarily took over an abandoned project. In case, the project had not moved forward, it would have resulted in heavy loss to the allottees.
Knowledge of carrying on of the business with intent to defraud creditors of the company or any other persons or for any fraudulent purpose is sine qua non to bring these persons within the ambit of section 339 of the Companies Act, 2013
The Mumbai Bench of the National Company Law Tribunal (NCLT) in the case of Union of India vs Infrastructure Leasing and Financial Services Ltd [IA 1/2022 IA 2/2022 COMP.APPL/ 313(MB)2025] dated March 24, 2026, has clarified that the aspect whether third persons, including the auditors, participated in, facilitated or assisted fraudulent transactions by a company knowing that the company’s business is being carried on for any fraudulent purpose can only be considered when the evidence(s) on record in relation to their role in perpetration of such fraud are examined.
No general rule for their exclusion from scope of section 339 of the Companies Act, 2013 can be laid, as it would depend on the facts of each case. Accordingly, the contention of third persons, including auditors, against their liability is premature at this juncture, added the NCLT.
The NCLT observed that Section 339 of the Companies Act makes liable any person, who is or has been a director, manager, or officer of the company or any persons who were knowingly parties to the carrying on of the business if any business of the company has been carried on with intent to defraud creditors of the company or any other persons or for any fraudulent purpose.
The Tribunal observed that the definition of officer under Explanation (b) to section 339 has the effect of excluding the word ‘key managerial person’ from the ambit of section 339 of the Act, however, they may fall under the words “any person”.
Further, the Tribunal held that the words “any person” cannot be read ejusdem generis to the words ‘officer, manager or director’ so as to hold that any person would only include a person who is an insider to the company, instead this word is a catch all provision to bring within its ambit any third person i.e. outsider who participated or aided or assisted in the fraud perpetrated by the insiders i.e. ‘officer, manager or director’.
The knowledge of carrying on of the business with intent to defraud creditors of the company or any other persons or for any fraudulent purpose is sine qua non to bring these persons within the ambit of section 339 of the Companies Act, 2013, added the Tribunal.
Moving ahead, the Tribunal made it abundantly clear that the word ‘any persons’ would also include the persons outside the organisation of the company, in whose affairs the fraud has been committed, who participate in, facilitate or assist fraudulent transactions by a company when they know that the company’s business is being carried on for any fraudulent purpose. It also follows that the third persons cannot be automatically brought within the ambit of section 339 of Companies Act, 2013 merely because they were parties to any activity alleged to be fraudulent unless they have participated in facilitating or furthering the said fraudulent activity.
In relation to the liability of Auditors and their partner(s) under Section 339, the Tribunal noted that an Auditor in view of his professional obligations is equated to a watchdog but not a blood hound, however, a watchdog cannot claim immunity if it is found that watchdog deliberately or consciously failed to be vigilant to allow perpetration of fraud by the insiders of the company and such deliberate or conscious act on part of watchdog furthered or facilitated commission of fraud.
The auditors cannot claim any immunity if they are found guilty of active participation or collusion or abatement in the commission of fraud in the affairs of auditee company. Accordingly, the action u/s 339 against the auditors will not lie automatically, however, their culpability in commission of fraud remains subject matter of examination and depends on the evidences on record, concluded the Tribunal.
Non-banking financial companies as defined in clause (f) of section 45-I of the RBI Act, 1934, having assets worth rupees one hundred crore and above, shall be entitled for enforcement of security interest in secured debts and the presence or absence of their name in the notification dated August 05, 2016 is irrelevant in view of notification dated February 24, 2020
The Allahabad High Court in the case of Rakesh Kumar vs Union of India [WRIT – C No. – 5496 of 2026] dated March 24, 2026, has clarified that Save Financial Services Private Limited (Respondent no. 4) being a financial institution for the purposes of the SARFAESI Act, 2002, no writ is maintainable in view of the availability of an efficacious alternative statutory remedy. Hence, the Court dismissed the petition challenging symbolic possession of the secured asset, leaving it open for the petitioner to avail appropriate legal remedy before the appropriate forum in accordance with law including approaching the DRT to avail the statutory remedy available under Section 17 of the SARFAESI Act.
The High Court observed that the underlying purpose of the SARFAESI Act, 2002 is to empower financial institutions to take possession of securities and sell them, as translated into provisions falling under Chapter III of the Act. The Bench examined Section 2(1)(m)(iv) of the SARFAESI Act, which empowers the Central Government to notify institutions as “financial institutions”, and Section 45-I of the Reserve Bank of India Act, 1934.
The Court noted that the notification dated Feb 24, 2020 was notified in supersession of the notification dated August 05, 2016. Through the notification dated Feb 24, 2020, the Central Government specified that all non-banking financial companies as defined in clause (f) of section 45-I of the RBI Act, 1934, having assets worth rupees one hundred crore and above, shall be entitled for enforcement of security interest in secured debts of rupees fifty lakh and above, as financial institutions for the purposes of the said Act.
The Court observed that the presence or absence of the name of respondent no. 4 in the notification dated Aug 05, 2016 becomes irrelevant after the notification dated Feb 24, 2020. The Bench further observed that the notification dated Feb 12, 2021 amended the notification dated Feb 24, 2020, substituting the words “rupees fifty lakh and above” with “rupees twenty lakh and above”. Consequently, the Court found no reason to doubt that respondent no. 4 is a financial institution and can invoke provisions of the SARFAESI Act within its statutory framework.
Regarding maintainability, the Court observed that Section 17 of the SARFAESI Act provides a comprehensive and efficacious remedy to any person aggrieved by measures taken under Section 13(4) of the Act before the Debts Recovery Tribunal. It reiterated that where a statute provides for an efficacious alternative remedy, the High Court would ordinarily refrain from exercising its jurisdiction under Article 226 of the Constitution of India, and a writ petition against a private financial institution involving disputed questions of fact is not maintainable when a complete statutory mechanism is provided.
REGULATORY UPDATES
Lok Sabha passes Insolvency and Bankruptcy Code (Amendment) Bill, 2025; Introduces a Creditor-Initiated Insolvency Resolution Process (CIIRP) that allows for out-of-court commencement of insolvency proceedings
Seeking to address procedural delays and interpretational issues that the Insolvency and Bankruptcy Code, has faced, the Lok Sabha passes Insolvency and Bankruptcy Code (Amendment) Bill, 2025 on March 30, 2026, removes the liquidator’s powers with respect to admitting/rejecting claims and determining their value. It also provides the committee of creditors (CoC) the power to appoint or remove the liquidator and supervise the liquidation process.
The Bill introduces a Creditor-Initiated Insolvency Resolution Process (CIIRP) that allows for out-of-court commencement of insolvency proceedings by select financial institutions. Further, the debtor remains in control of the company during CIIRP. The Bill empowers the central government to frame rules related to group insolvency and cross-border insolvency proceedings.
Key updates:
The Code states that NCLT may admit CIRP if the default is proven, the application is complete, and no disciplinary proceedings are pending against proposed RP. It requires NCLT to pass an order within 14 days of receiving the application. The Bill makes it mandatory to admit the application when these conditions are met. It specifies that: (i) no other grounds can be considered to reject an application, (ii) NCLT must record reasons in writing if no order is passed within 14 days, and (ii) records from information utility will be sufficient proof of default.
The Bill allows withdrawal of an insolvency application only after the CoC has been constituted and before the first invitation for resolution plans. Such withdrawal would require the approval of 90% of the CoC. Currently, withdrawals are permitted even before the constitution of CoC, and after first invitation of resolution plans. The Bill also allows withdrawal of voluntary liquidation by a special resolution of shareholders and, if required, a resolution of creditors of two-third in value.
The Bill empowers the CoC to supervise liquidation. Presently, a stakeholder consultation committee (SCC) is constituted with all creditors, employees and even shareholders/partners during liquidation. The liquidator is required to consult the SCC on key decisions. However, their advice is not binding on him. The Bill also provides that the RP will not be appointed as the liquidator automatically. The liquidator will be appointed on the proposal of the CoC. CoC may also replace the liquidator.
The Bill adds that NCLT must pass the order for liquidation within 30 days from the date of the application or intimation. It also specifies that liquidation proceedings must be completed in 180 days, extendable by up to 90 days. Further, voluntary liquidation proceedings must be completed within one year.
The Bill clarifies that ‘security interest’ excludes security interest created by virtue of provisions in law. Further, government dues do not have the status of ‘secured creditor’. A security interest is the legal right a creditor has over a debtor’s asset(s) that serve as collateral.
The Bill introduces an alternative process called Creditor-initiated Insolvency Resolution Process (CIIRP). CIIRP is different from CIRP in the following manner: (i) it may be initiated only by specified financial creditors, (ii) it is to be initiated out-of-court, with at least 51% (by value of debt) of the notified financial creditors agreeing to the initiation, and (iii) during CIIRP, management of the company will remain with the debtor, subject to oversight by the RP. CIIRP must be concluded within 150 days, extendable by up to 45 days. CoC may decide at any time to convert the CIIRP into CIRP and seek an order from the NCLT for that conversion.
The Bill contains an enabling provision empowering the central government to prescribe rules for administering and conducting cross-border insolvency proceedings.
The Bill empowers the central government to formulate rules for conducting group insolvency proceedings. The rules may provide for a common bench for such debtors, coordination between the proceedings, common insolvency professionals, and a committee of CoCs of the debtors.
The Bill enables a creditor, who holds a security interest over a guarantor’s asset and has taken possession of that asset under any law, to transfer that asset as part of the corporate debtor’s CIRP. This can only be done with the approval of the CoC. Where the guarantor is also undergoing insolvency or bankruptcy proceedings, approval from the guarantor’s creditors would also be required.
Click here to read/ download the original Bill
